SPX
Bearish long day. Midpoint below EMA(10). Still failing SMA(21). Still failing the 0.0% retrace (1463.76). No daily 3LB changes (reversal is 1432.12). QE2infinity. Still below the trend line and now testing the other trend line.

DXY
Spinning top day. Midpoint above EMA(10). Tested and held the 38.2% retrace (79.97). Holding above SMA(21). New high on dally 3LB (reversal is 79.27).

4
comments:

Investors warning: "forewarned is forearmed". The financial system is potentially far more unstable than I originally thought!

The Black-Sholes equation does not fit the form of the typical industrial feedback control loop. There is no reconciling control algorithm to adjust B-S calculated price for the derivative V vs. its real-time value as traded. As a result it is not truly adaptive to step changes and disturbances in the market. It is limited to setting the "Greek" tuning parameters correctly. Stock Price, Time, and Interest Rate are the only directly measured variables.

B-S appears more like a complex price tracking/following/look-up table algorithm to derive a likely price of a derivative.

By analogy and experience in the real world of feedback loops, computer driven HFT and executing B-S type time based differential equations could have similar inherent modes of instabilities. And by extension one could reasonably see where the financial world with all its complexity is exposed to many of the same shortcomings that have taken generations in the industrial world to correct. Add to this the potential of a security threat of a destabilizing attack over and above the usual fraud and criminal activity.

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